By Deepti George, IFMR Finance Foundation
IFMR Finance Foundation worked with Pension Fund Regulatory and Development Authority of India (PFRDA) as Knowledge Partners to help organise their first NPS-Lite Aggregators’ Meet in New Delhi, on 21st November, 2011. The meet brought together aggregators and other stakeholders under one roof, to address issues and concerns faced while distributing NPS-Lite and Swavalamban benefits to their customers.
The Meet was attended by all senior members of PFRDA along with representatives from over 25 different organisations, including Nitin Chaudhary and Anil SG from IFMR Rural Finance who were also part of separate panels. PFRDA used this opportunity to announce a new incentive scheme for the Aggregators where they increased the fixed incentive from INR 50 to INR 100. PFRDA also released new communication material that was designed specific to each aggregator’s need and could be used for creating awareness about pensions, NPS-Lite and Swavalamban benefits.
The Meet kicked off with an opening statement by Mr.P Upadyay, Chief General Manager, PFRDA, and was followed by an overview of the two pension schemes, NPS Lite and Swavalamban, by Ms.Padma Iyer Kaul, Executive Director, PFRDA. She set the tone of the conference by highlighting the importance of pensions and guided the participants in practically addressing the issues they may have with the two schemes. Mr.Yogesh Agarwal, Chairperson, PFRDA, also graced the conference with his presence and thanked the aggregators for their efforts.
The Meet brought critical issues to the table resulting in lively discussions on product design, need for a standardised method of delivery through technology and the inherent necessity for a nation-wide awareness campaign to highlight pensions as an important financial planning tool.
In response to the concerns highlighted, some fascinating suggestions and innovations, few already being implemented by Aggregators, were brought to light. Some of these are:
1) The need to develop communication and marketing collateral that can be deployed to create awareness and educate people on pensions – in order to create the market for pensions
In this context, Nitin Chaudhary, explained the Wealth Management approach of KGFS entities that has enabled it to become the leading aggregator in terms of penetration of NPS Lite. He also shared training materials and flipcharts currently being used at KGFS. South Indian Bank also shared their ideas they had successfully implemented, where they used the NPS-Lite logo on all receipts and envelopes. A few aggregators like Bandhan Financial Services and Department of Women and Child Development (DWCD) had even developed their own passbooks to record transactions and help customers keep track of their contributions.
2) The importance of building technology platforms which help to reduce transaction and process costs along with reducing operational risk
Mr. Amit Sinha, from NSDL suggested that using mobile phones for transactions would encourage portability across aggregators and increase efficiency. It was also suggested that creating applications that could be shared with all Points of Purchase was cost-effective and easy to build, also paving way for inter-operability between aggregators, and across locations. Inter-operability was especially important given that the access to this long-term product must not be aggregator-dependent.
3) Concerns relating to delayed issuance of PRAN (Permanent Retirement Account Number) cards and data errors
IFMR Rural Finance shared its feat of being the first aggregator to generate PRAN directly in collaboration with the CRA (Central Recordkeeping Agency), thereby reducing TAT to less than 24 hours. Data errors could also be minimized by IFMR Rural Finance as the application forms get pre-populated with customer details directly from the Customer Management System rather than by a manual data-entry process.
4) KYC requirements contribute to exclusion of segments of the population, especially the migrant population
Ms. Gayathri of Labour Net suggested that given the essentially floating nature of migrant populations that could potentially enroll for NPS-Lite, a more diverse set of documents could be included for KYC norms to enhance outreach. It was also suggested that a “one-size-fits-all” strategy should not be adopted for the given target population, but rather there is a need to develop different strategies for different segments such as the stable urban poor, the daily wage migrants, seasonal migrants, and so on.
5) Increase benefits and attractiveness of NPS Lite and Swavalamban for the customer
It was suggested by Anil SG of IFMR Rural Finance that NPS-Lite may be clubbed with health insurance products like RSBY to take care of a gamut of eventualities that the individual or household may face, which may otherwise force them to dip into their pension corpus. This would provide customers with multiple benefits, mitigating not only longevity risk but also addressing to an extent, health shocks.
Going forward, IFMR Finance Foundation is drafting a report collating recommendations of participants from the Meet and suggesting ways forward for the NPS-Lite and Swavalamban schemes.